I Lost My Job How Do I Stay Out Of Debt?

unemployed guy

More than 2.5 million people in the UK are unemployed. Many lose their jobs due to redundancy, which can be a particularly bitter pill.

Creditors do not care about the reasons for unemployment, they want bills to be paid.

This may be impossible when there is not enough money in the bank account.

Faced with whether to feed the family or pay the credit card bill, most people will choose food.

This is not an unwise decision but can put the household into debt. Avoiding debt while unemployed can be difficult, but it is not impossible.

It requires keeping a sharp eye on spending and making finances a top priority. This prevents a temporary setback from becoming a long-term issue that ends in bankruptcy.

How To Avoid Debt While Seeking Employment

The household budget should be revised immediately after becoming unemployed. Knowing how much money is available reveals how much can be spent. Add up the amount of accessible money including unemployment insurance, any severance package, and savings. Divide this figure by the number of months expected to find a new job (experts recommend at least six). The result is the amount that can be spent each month during unemployment.

Add up all monthly outgoing expenses, including mortgage or rent, utilities, food, health care, car, and travel. Add credit card and loan payments to this amount. If any annual expenses come due during the anticipated period of unemployment, add these as well. The resulting figure will be the total monthly expenses and in most cases, this will be higher than the total available for monthly spending.

Cut back on luxuries and other non-essentials

Review all areas of spending to determine what can be done on a temporary or permanent basis. Classify each expense as either a necessity or a luxury. For example, spending money on food is essential to remain healthy but spending on holiday travel is not. Luxury expenses like travel may need to be eliminated until income resumes. Taking a holiday may still be possible but the destination may be closer to home or involve staying with a friend or family member.

After eliminating luxury expenses from the budget, re-review essential expenses. It may be possible to trim these a bit more. Though spending on food is necessary, purchasing food at the grocery store and making meals at home is much cheaper than dining out. Sales, coupons, and purchasing in bulk are several ways to save additional money on food. To keep utility expenses low, prepare an entire week of meals in one night and refrigerate or freeze them to enjoy later.

Time For A Paradigm Shift

Once expenses have been thoroughly scrutinized, turn the focus to income. Though getting a new job right away may be challenging, there are other ways to earn money. Clean out the house and sell unwanted items. If there is a spare room in the house, rent it temporarily to have another person help pay the bills. Ask friends and neighbours if they need help with yard work, babysitting, or caring for their pets. These casual jobs may not pay much, but the income is better than nothing. Some people have even started working for semi-commercial mixed-use mortgage lenders to convert old shops with flats above them into residential dwellings. If you’re not afraid to get your hands a little dirty there is plenty of work out there. The same applies to companies that offer HMO finance. There are plenty of old buildings out there that developers need help converting into multiple occupancy units.

A period of unemployment may provide time for career assessment. If previous jobs were less than desirable, maybe it is time for a change. People with latent talents may put these to use by starting a business. Others decide to forego permanent work for consulting jobs. Though finances may be tight during unemployment, this may also be the time for career exploration.